Brussels must intervene in the European dairy market

Brussels must again intervene in the European dairy market. That is the recommendation made by a German research institute and the European Milk Board (EMB) based on an evaluation of the German milk price.

According to the research, the average milk price in Germany no longer covers the costs incurred by dairy farmers for years. This encourages economies of scale, which in turn puts pressure on the dairy market. In the study, the milk price in Germany symbolizes the situation in Europe. 

The research compares the cost price with the yield, in this case that is the milk price. According to the survey, German dairy farmers have been producing below cost for years. The lowest point was in 2016. Then the milk price even dropped below 25 cents in the summer months. In 2016, German dairy farmers saw "only" 62 percent of the costs reimbursed in the milk price. Similar situations occurred in the rest of Europe. In Bulgaria, the milk price was only 17 cents last July.   

The recovery in the dairy market has not yet resulted in cost-effective revenues. The average milk price of 33,76 euros last January only covered 77 percent of the costs. In addition, recovery has been, more or less, artificially facilitated. This is because of the voluntary milk reduction program in the European Union. According to the survey, there are signs that prices will fall in the long term, while further recovery is necessary.

Structural measures needed
According to researcher Schaber, it is therefore important that a legal framework is in place. This framework should support dairy farmers in the event of poor prices. Without regulation, individual dairy farmers are more or less forced to increase production when yields are poor. More milk is ultimately harmful to the entire market. 'Dairy farmers as well as politicians have experienced the consequences of a flooded milk market in recent years,' says Schaber.

The EMB therefore calls on European Commissioner Phil Hogan, and other agriculture ministers, to introduce a Market Responsibility Program (MRP). Only with such regulation, such as voluntary milk reduction, can the European Union get a grip on the capricious dairy market, which often dangles in the critical zone. 

Wouter Job

Wouter Baan is editor-in-chief of Boerenbusiness. He also focuses on dairy, pig and meat markets. He also follows (business) developments within agribusiness and interviews CEOs and policymakers.

w.baan@boerenbusiness. Nl

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